Where and How Do Remote Workers Pay Taxes?

The Rise of Remote Work Across Borders

The remote work revolution has broken traditional geographic limits, unlocking global opportunities for workers and companies alike. But this freedom comes at a cost: that of navigating remote worker tax rules.

Due to the uncertainties many companies face around the exact rules that do and don’t apply to remote working relationships, knowing how remote worker tax rules and international tax compliance work in a variety of jurisdictions is now one of the most pressing challenges for both employees and employers worldwide.

Global mobility, digital nomadism, and cross-border employment

As the number of individuals living as digital nomads has surged and is expected to continue increasing for the foreseeable future.

Today, remote jobs allow professionals to work from Bali one month and Berlin the next, the appeal of which is clear. However, remote work taxes by country are inconsistent, often confusing, and sometimes contradictory.

Modern professionals can live and work anywhere with a stable Wi-Fi connection and a quiet space. This flexibility has created a new category of worker: the location-independent employee. These workers are often employed by companies in one country while residing in another, whether temporarily or permanently.

Why tax questions are more relevant than ever for remote workers

Tax agencies around the world are catching up with the digital work era, and such workers can no longer assume they’re under the radar. As remote work arrangements multiply, so do the tax implications of working remotely, including residency status, employer tax withholding, and liability for social contributions.

For some, remote working rules may be a new point of concern, or others may be uncertain about changing rules that affect their tax culpability and final take-home pay. Whatever the case, taxes for remote workers dealt with ineffectively can make working situations untenable or even dangerous.

What This Guide Covers

• Tax residency rules and double taxation – Understanding how to pay taxes while working abroad begins with determining where you’re considered a tax resident. Residency drives tax obligations. Misunderstanding this could mean double taxation or unintentional non-compliance. We’ll explain how tax residency is determined, and how double taxation can be avoided through treaties and planning.
• Employer obligations for remote workers – Companies hiring remote staff abroad face a different set of rules than domestic employment. From payroll taxes to registration requirements, ignoring these responsibilities could result in fines or retroactive penalties. This guide will explore how to understand remote work taxes by country from an employer’s perspective.
• Practical tips for compliance and planning – Whether you’re a freelancer, digital nomad, or HR professional, staying compliant across borders requires knowledge, tools, and strategy. We’ll break down best practices and planning advice, including when to bring in experts and how to stay organized while on the move.

Understanding Tax Residency

What Determines Your Tax Residency

One of the most misunderstood aspects of remote work is tax residency. Simply living in a different country doesn’t necessarily make you a tax resident, but it might.

Days in-country, permanent home, economic ties

Most countries use a combination of factors to determine tax residency, including:

• The number of days you spend in the country (often a 183-day rule).
• Whether you maintain a permanent home in that location.
• Whether you have economic ties, such as bank accounts, family, or employment.

Even if you’re constantly moving, staying too long in one place may unintentionally make you a tax resident there, triggering local tax filing and payment requirements.

Common thresholds: 183-day rule and beyond

The 183-day rule is widely used but not universal. Some countries consider other elements, like where your center of vital interests lies, in order to determine residency. For example, Spain considers tax residency as based on the location of your primary residence, while the UK may evaluate where you spend most of your time or where you work.

Understanding these nuances is essential because if you hit the wrong threshold, you could be legally required to file taxes in that country even if your employer is based elsewhere.

Key Considerations for Digital Nomads

Staying compliant while moving frequently

Digital nomads face a particularly tangled tax situation due to the way that tax laws rarely work smoothly across a variety of jurisdictions. While moving from country to country may seem like a clever way to avoid residency and taxes, it rarely works that way. In fact, today, many governments scrutinize digital nomads more closely than other types of workers, especially if their income is sourced from outside the host country.

Without clear ties to a home country or by inadvertently meeting multiple residency thresholds, digital nomad tax residency becomes murky. You may end up being a tax resident in more than one country, facing double taxation unless you have a treaty in place.

Countries with digital nomad visas and tax implications

To address these challenges, many nations have introduced specific digital nomad visas that offer legal entry and stay for remote workers, but often come with clear and specific conditions about tax obligations. For instance, Portugal’s digital nomad visa permits remote workers to stay long-term, but staying past certain thresholds can make them subject to Portuguese tax law.

It’s crucial to read the fine print. While some countries might exempt foreign income for digital nomads, others may treat them like full residents after a certain time. Unfortunately, misunderstanding these terms can result in unexpected tax bills or worse.

Common Mistakes and Misunderstandings

Thinking you don’t owe taxes if you’re always moving

Mobility doesn’t equal tax invisibility, and one common misconception that catches people out time and time again is that if you’re never in a country long enough, you don’t owe taxes anywhere.

In reality, many countries consider global income taxable once you establish even a limited presence. If you’re a citizen of a country with worldwide taxation (like the U.S.), you’re liable for taxes regardless of where you live or work. However, many of these countries also have ways to lower or replace global tax eligibility in specific cases.

Assuming your home country won’t tax your income

Another error is assuming your home country won’t tax you because you’re living abroad. Countries like Canada or Australia may still consider you a resident for tax purposes if you maintain significant ties like a home, spouse, or bank accounts.

In general, failing to plan for these rules can result in audits, back taxes, and penalties. You must prove you’ve cut tax residency ties with your home country through complex application processes, and even then, you may still have some filing obligations.

How Remote Workers Pay Taxes Around the World

Based on Citizenship or Residency

The first thing every remote worker must determine is whether the country they’re tied to taxes based on citizenship or residency. This difference forms the foundation of remote worker tax rules and can radically shift your obligations depending on where you are from and where you live.

The US worldwide taxation system for citizens

The United States is one of the few countries that imposes worldwide taxation based on citizenship. This means that even if a US citizen lives entirely abroad and earns income elsewhere, they’re still required to file US tax returns annually. In many cases, they may also owe tax, unless specific exclusions or credits apply.

US remote workers can benefit from provisions like the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to reduce or eliminate double taxation, but these mechanisms require careful qualification and paperwork.

Failing to file US taxes while working abroad, even unintentionally, can trigger significant penalties.

Residency-based taxation in most other countries

For remote workers affected by residency-based systems like the 183-day rule, this means spending too long in one country without understanding the tax system can lead to unexpected liabilities.

Even if income is earned remotely from a foreign client or employer, the host country might still tax it under local law. This makes it essential to understand remote work taxes by country, especially before settling down long-term.

Filing Taxes While Living Abroad

Local tax returns vs. home country obligations

Living abroad doesn’t eliminate the requirement to file taxes in your home country, especially for citizens of countries like the US, the Philippines, or Eritrea, where taxation is citizenship-based. However, even for those from residency-based countries, home country obligations can persist if significant connections remain.

At the same time, remote workers may also be required to file local tax returns in the country where they’re currently residing or working. Some digital nomads mistakenly assume their income is invisible to local tax authorities if it’s earned from abroad. But local rules often say otherwise, and despite a growing desire to attract remote workers, there is still a need among many governments worldwide to set a clear example to digital nomads that working in a country means paying taxes in some form or another.

Double taxation agreements may come into effect later, but if you open a local bank account, rent property, or enter into employment contracts, you may trigger filing obligations that at least require initial action.

Tools and services for filing internationally

Remote workers today have more resources than ever when dealing with issues of cross-border taxation. There are now numerous platforms designed specifically for international tax filing, such as Taxumo, Taxfyle, or Greenback Expat Tax Services. These tools help with multi-country filing, digital document submission, and treaty application analysis.

Still, even the best tools require the right inputs, and human support can be essential. Misreporting residency status or income sources can invalidate treaty benefits or exclusions. That’s why the best platforms mix smart, tech-driven solutions with human expertise.

Double Taxation and Tax Treaties

What Double Taxation Means and How to Avoid It

Double taxation occurs when two countries tax the same income. For example, if you’re living in Spain as a US citizen and earning income from a US company, both Spain and the US may claim tax rights over the same income.

This situation can become a nightmare without proper planning, so that’s where tax treaties come into play. Many countries have agreements that prevent income from being taxed twice, usually through credits, exemptions, or split-residency rules.

To benefit, you often need to:

• File tax returns in both countries.
• Submit claim forms for treaty benefits.
• Prove residency or eligibility under treaty terms.

However, even if these agreements exist, they’ll require planning and applications that might only take effect retroactively.

How to benefit from tax treaties between countries

Most tax treaties define the “tie-breaker” rules for determining which country has the right to tax an individual. These may be considered:

• Where the person has a permanent home.
• Where they have closer personal and economic relations.
• Where they are a national or citizen.

Employer and Freelancer Obligations

Taxes for Remote Employees vs. Contractors

One of the first questions for any business engaging remote talent is: Are they an employee or a contractor? The answer has major implications for tax compliance, payroll obligations, and international reporting.

Withholding, reporting, and compliance issues

For employees, companies are often responsible for withholding income taxes, paying employer-side contributions, and filing labor-related documentation with local authorities. If the employee is based in another country, the business may be required to register a local entity or use an Employer of Record (EOR) solution to remain compliant.

Contractors, on the other hand, are responsible for managing their own tax payments, with some countries seeing any company support or involvement as a red flag signaling contractor misclassification.

While hiring contractors offers more flexibility, it also comes with more risk, as if local authorities determine that a contractor is actually functioning like an employee, based on hours, exclusivity, or control, the business may be fined for misclassification.

Differences in treatment for payroll vs. invoices

When hiring abroad, it’s tempting for companies to avoid payroll complexities by classifying workers as independent contractors and paying them via invoices. But this can quickly become problematic.

Some countries have strict rules regarding what constitutes an employment relationship. Paying a remote worker via invoice doesn’t automatically exempt the company from compliance responsibilities. In fact, this could trigger retroactive payroll tax obligations, social security contributions, and penalties.

To eliminate these risks, many global companies partner with experts in global employment like  INS Global, which offers EOR and PEO services to avoid the risks or costs of hiring workers as contractors overseas. These solutions allow businesses to hire remote employees in full compliance, without the complexity of establishing a legal entity in every country.

Company Responsibility When Hiring Abroad

When a company must register in a foreign country

If an employee is performing services in another country on a regular basis, the company might inadvertently create a permanent establishment (PE) in that country, which can trigger a host of other obligations, including:

• Registering with the local tax authorities.
• Filing corporate income taxes.
• Withholding payroll taxes for the local worker.

Even a single remote employee can sometimes constitute a PE, especially in countries with aggressive tax enforcement. As a result, companies need to be aware of local rules, as those that ignore these obligations often face retroactive audits and hefty fines.

INS Global’s EOR service eliminates these concerns by acting as the legal employer on behalf of international companies. This approach allows businesses to manage global teams without triggering unintended corporate liabilities abroad.

Taxes for Self-Employed Remote Workers

Filing as a freelancer abroad

Freelancers and self-employed remote professionals often face more complex tax obligations than salaried employees due to the levels of jurisdictions involved or the confusion between personal and corporate responsibility.

Without an employer handling tax withholding, the responsibility to stay compliant falls entirely on the individual. For freelancers working across borders, this means navigating the tax laws of multiple jurisdictions while ensuring compliance with both their home country’s rules and the rules of the countries where they perform services.

How to pay taxes while working abroad as a freelancer involves more than just filing annually. You may need to:

• Register with local tax agencies if you exceed income thresholds.
• Pay estimated quarterly taxes in multiple countries.
• Maintain meticulous records of invoices and payments.

This includes numerous costs in terms of time and money, making potentially important overseas placements less attractive for those who believe they will be responsible and liable for excessive administrative work.

VAT/GST considerations depending on the country

Another layer of complexity for self-employed workers is VAT (Value-Added Tax) or GST (Goods and Services Tax). In many countries, freelancers are required to register and collect VAT once their income surpasses a certain threshold, even when working remotely.

For example:

• In the EU, digital service providers may need to register for VAT under the One-Stop-Shop (OSS)
• Australia and New Zealand apply GST on digital services sold to residents, even by foreign freelancers.
• Canada has strict GST/HST rules for self-employed individuals once their revenue exceeds a minimal threshold.

Understanding these obligations and others like them is crucial, as failure to comply can lead to audits, denied entry, or even tax penalties.

Tools, Tips, and Best Practices

How to Stay Organized as a Remote Worker

Organization is your greatest defense against tax confusion. Remote workers must, therefore, adopt best practices to avoid errors and oversights that could lead to penalties or unnecessary taxes.

Track time in each country and save all documents

One of the most important habits for global workers is to track how many days they spend in each country. Crossing the wrong threshold, even briefly, can mean changing your tax residency status, and without documentation, it can be difficult to defend your position during an audit.

Therefore, remote employees should maintain a travel log and store it alongside important tax documents such as:

• Payment records
• Contracts and invoices
• Residency documents or visas
• Utility bills or rental agreements

Staying organized in this way and seeing this record-keeping as just another essential function involved in remote work ensures you’re prepared to answer any questions from tax authorities, whether domestic or international.

Maintain dual bank accounts and expense logs.

With the rise of digital banks and new products offered by international banking groups, many are now eligible for specific dual-currency or cross-border banking accounts. Having dual bank accounts can help freelancers and remote workers manage finances across borders more efficiently by skipping or streamlining conversion processes or clearly separating personal and business expenses.

While this is representative of a far easier way to work internationally, be sure to always document expenses or payments thoroughly, as operational simplicity comes with legal complexity, especially when working across multiple jurisdictions where rules on deductible business costs may differ.

When to Hire a Tax Professional

Situations where DIY won’t cut it

Even the most financially literate workers hit a point where professional help becomes necessary, or simply managing everything involved in full compliance assurance would become its own job. If you find yourself facing any of the following, it may be time to consult an expert:

• Earning income in multiple countries
• Filing in both your home and host countries
• Applying complex tax treaty benefits
• Facing potential double taxation
• Needing to understand employer-related liabilities

Finding a cross-border tax advisor

When hiring a professional, look for one with a background in international taxation. Avoid generic accountants who only deal with domestic filings. The right advisor will understand digital nomad tax residency, remote work taxes by country, and the nuances of double taxation treaties.

Don’t Let Tax Confusion Derail Your Global Plans

Remote work is here to stay and looks set to play an even bigger role in global expansion over the coming years. But the rules, obligations, and pitfalls of international taxation are growing each year as governments and tax authorities set out their own needs for proper global tax coverage.

Whether you’re a solo freelancer managing your own finances or a global enterprise building distributed teams, understanding remote worker tax rules has never been more essential.

From tracking digital nomad tax residency to managing employer responsibilities across borders, the stakes are too high to leave it to chance. Missteps can lead to double taxation, legal trouble, or sudden tax debts in unexpected countries.

That’s why INS Global offers the comprehensive expertise you need to stay ahead of every challenge. With services including PEO, EOR, global payroll, tax compliance, and more, INS Global ensures that your remote workforce is not only efficient but also fully compliant, wherever they are in the world.

Ready to simplify the complex world of international tax compliance? Partner with INS Global and take the stress out of hiring, managing, and paying remote teams, anywhere.